INTERAGENCY GROUP ON INTERNATIONAL ECONOMIC POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000400570050-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 21, 2016
• Document Release Date: July 7, 2008
• Sequence Number: 50
• Publication Date: May 10, 1983
• Content Type: MEMO

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OFFICE OF THE SECRETARY OF THE TREASURY
WASHINGTON, D.C. 20220
May 10, 1983
Exacut?vs RE, ;:!
-x:503
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MEMORANDUM FOR: OVP
STATE
OPD
NSC
AGRICULTURE
CIA
COMMERCE
DEFENSE
USTR
CEA
OMB
LABOR
- MR. PHILIP HUGHES
- MR. CHARLES HILL
- MR. LES DENEND
- MR. JOHN POINDEXTER
- MR _ RAVM()Nil T.FT'P
- MRS. HELEN ROBBINS
- COL. JOHN STANFORD
- MR. DENNIS WHITFIELD
- MR. WILLIAM A. NISKANEN
- MR. ALTON G. KEEL
- MS. RUTH MORGENSTERN
SUBJECT: Interagency Group on International Economic
Policy (IG-IEP)
Assistant Secretary Leland requests that you provide
comments on the attached draft Administration International
Investment Policy Statement and background paper by Wednesday,
May 18. Following receipt of IG agency comments the Statement
and background paper will be redrafted and reviewed by the
SIG-IEP. The intention is to eventually release the Statement
as an Administration policy position.
Please direct your comments to Frank G. Vukmanic of my
staff. Frank can be reached on 566-2386.
1~mo*
David E. Pickfo
Executive Secreta y
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Draft International Investment
Policy Statement
Executive Summary
International direct investment plays a vital and expanding
role in the world economy. To ensure its maximum contribution
to both global and domestic economic well-being, the United
States believes that international direct investment flows
should be determined basically by private market forces and
should receive non-discriminatory treatment consistent with the
national treatment principle.
The United States welcomes foreign direct investment that
flows according to market forces. The United States accords
foreign investors the same fair, equitable, and non-discriminatory
treatment it believes all governments should accord foreign
direct investment under international law.
The United States opposes continued and increasing government
intervention that impedes or distorts investment flows or
attempts to shift artificially the benefits of these flows.
These measures include trade-related or other performance
requirements, fiscal or financial incentives and discriminatory
treatment of foreign investment.
To counter such measures, the United States will pursue an
active international investment policy aimed at reducing
foreign government actions that impede or distort investment
flows; and at developing an international system, based on
national treatment and MFN principles, that permits investment
flows to respond more freely to market forces. The United
States will work to protect U.S. investment abroad from treatment
which is discriminatory or otherwise inconsistent with international
law standards. Under international law, no U.S. investment
should be expropriated unless the taking is done for a public
purpose, is accomplished under due process of law, is non-
discriminatory, does not violate previous contractual arrangements,
and is accompanied by prompt, adequate, and effective compensation.
In carrying out its international investment policy, in
multilateral institutions, the United States will continue to:
encourage OECD member governments to adhere to,
strengthen and extend OECD investment and capital
liberalization instruments;
explore ways of extending the principles embodied in
the OECD instruments to non-OECD countries;
support efforts to increase awareness of the extent
and adverse effects of government intervention in
order to build a global political consensus to reduce
such intervention;
work toward increased recognition of intellectual
property rights;
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-- work in the OECD for a "data pledge" which would
assure that no new barriers to data flows will be
imposed by developed countries; and encourage all
countries to join in adopting more open and liberal
policies on transborder data flows;
-- work to ensure that technology transfers are carried
out on a sound commerical basis, subject to national
security and foreign'policy considerations. [The
national interest may also call for policy considerations
regarding the investment transfer of leading edge
technologies which may have harmful effects on the
U.S. economy and security].
--
encourage
strengthen
financial
the Multilateral Banks to explore ways to
the private sector role in facilitating
flows to the developing world;
--
support investor access to third party arbitration to
settle investment disputes.
In its relations with individual countries, the United
States will:
-- provide services and assistance to American investors
abroad, and offer the full support necessary to
ensure that their investments are treated in accor-
dance with standards of international law;
-- ensure that the provisions of U.S. Friendship,
Commerce and Navigation treaties and bilateral
investment treaties and agreements are fully observed;
-- seek to conclude bilateral investment treaties and
agreements with interested countries;
-- explore other appropriate ways to support private
direct investment in developing countries;
-- reserve the right to take action against the use of
performance requirements and similar policies, consis-
tent with international obligations. The United
States will also exercise its rights under existing
international agreements.
The United States believes that a combination of multi-
lateral and bilateral efforts will contribute to a more open
global climate for investment and thus enhance the prospects
for economic growth in the United States and globally.
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U.S. Government Po7_icr on International Investment
I. Setting .
The United States believes that international direct
private investment plays a vital and expanding role in the U.S.
and world economies. It can act as a catalyst for growth,
introduce new technology and management skills, expand employ-
ment and improve productivity. Foreign direct investment can
be an important source of capital and can stimulate international
trade. Both home and host country economies benefit from an
open international investment system.
International direct investment can provide particular
benefits to developing countries. Foreign investment capital
can help to expand the domestic resource base, augmenting
locally-generated investment and foreign concessional flows.
Foreign direct investment may be of particular value to develop-
ing countries in that it contributes to domestic productive
capacity without increasing the debt service burden. Further,
developing countries may look to foreign direct investment to
create new employment opportunities and to provide needed
managerial and technical skills that cannot be gained through
foreign trade.
Under present circumstances, however, international
direct investment is being prevented from making its full
contribution to global economic growth. While the current
world trade and monetary systems (as embodied in the GATT and
the IMF) developed after World War II remain an important
foundation for the long-term growth and prosperity of the world
economy, there unfortunately exists no comparable system for
international direct investment. There has been little col-
lective restraint on widespread and distortive interventions by
both developed and developing governments, attempting to
control the flow of foreign direct investment and the benefits
associated with it. While the effects of intervention are
difficult to quantify, the impact can be negative for home,
host, and third countries because intervention distorts inter-
national investment and trade flows, thereby preventing the
most efficient allocation of resources.
Attempts have been made to address this problem but
progress has been slow. The inability to arrive at inter-
national consensus on these issues has created pressures in
many countries, including the U.S., to abandon more traditional
economic policies based on market forces and to move toward
still greater government intervention.
In light of these developments it is important that there
be a clear understanding both at home and abroad of U.S.
policies with respect to international direct investment
issues and how the United States intends to implement these
policies.
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II. U.S. Policy Precepts
The United States believes that an open international
investment system responding to market forces provides the best
and most efficient mechanism to promote global economic develop-
ment. Government intervention in the international allocation
of investment resources can retard economic growth.
The United States has consistently welcomed foreign
direct investment in this country. Such investment provides
substantial benefits to the United States. Therefore, the
United States fosters a domestic economic climate which is
conducive to investment. We provide foreign investors fair,
equitable, and non-discriminatory treatment under our laws and
regulations. We maintain only those safeguards which are
necessary to protect our security and related interests and
which are consistent with our international legal obligations.
The United States believes that U.S. direct investment
abroad should also receive fair, equitable and non-discriminatory
treatment, consistent with international law standards. The
basic tenet for treatment of investment is the national treat-
ment principle: foreign investors should be treated no less
favorably than domestic investors in like situations. Exceptions
should be limited to those required to protect national security
and related interests. In these cases, foreign direct investment
should be accorded treatment consistent with the most-favored-
nation principle.
The United States opposes the use of government practices
which distort, restrict, or place unreasonable burdens on
direct investment. These include such measures as trade-
related or other performance requirements (such as local
content, minimum export, and local equity requirements),
fiscal or financial incentives. Interference with the market
mechanism can cause serious distortions in trade and investment
flows, encourage the retaliatory use of similar measures by
other governments, and precipitate a downward spiral in global
investment flows. The United States intends to continue its
efforts to reduce or eliminate measures that restrict, distort
or place undue burdens on international direct investment
flows.
The United States will continue to work for the reduction
or elimination of unreasonable and discriminatory barriers to
entry of investment. The United States believes that foreign
investors should be able to make the same kinds of investment,
under the same conditions, as nationals of the host country.
Exceptions should be limited to areas of legitimate national
security concern or related interests. Because establishment
questions are not adequately covered in existing multilateral
instruments relating to investment, the United States will
encourage broader exploration, identification and discussion of
these issues in the OECD and elsewhere.
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The United States recognizes that international direct
investment frequently serves as a vehicle for transfer of
technology and can benefit the economic development goals of
both home and host countries. Technology transfers should be
carried out on a sound commercial basis, subject to national
security and foreign policy considerations. [The national
interest may also call for policy considerations regarding the
investment transfer of leading-edge technologies which may have
harmful effects on the U.S. economy and security].
The United States places high priority on the protection
of U.S. investment abroad from discriminatory treatment, or
treatment which is inconsistent with international law standards.
Under international law, no U.S. investment should be expropriated
unless the taking (a) is done for a public purpose; (b) is
accomplished under due process of law; (c) is non-discriminatory;
(d) does not violate any previous contractual arrangements
between the national or company concerned and the government
making the expropriation; (e) is accompanied by prompt, adequate
and effective compensation.
III. General U.S. Objectives
The United States accords foreign investors open access to
our markets and technology. What we seek is similar access for
United States investors abroad. The fundamental objective of
our international investment policy is acceptance of the
national treatment principle. In those limited sectors where
national security or related interests preclude the extension
of national treatment, most-favored-nation treatment should
apply.
In addition, the United States seeks to:
strengthen multilateral and bilateral discipline over
government actions which affect investment decisions,
such as incentives and performance requirements,
particularly when such actions distort international
trade and investment flows;
reduce unreasonable and discriminatory barriers to
establishment;
create, through cooperation among developed and
developing nations, an international. environment in
which direct investment can make a greater contribution
to the development process;
foster a domestic economic climate in the United
States which is conducive to investment, ensure that
foreign investors receive fair and equitable treatment
under our statutes and regulations, and maintain only
those safeguards on foreign investment which are
necessary to protect our security and related interests
and which are consistent with our international legal
obligations;
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The United States will:
continue to adhere to the OECD Investment Declaration
and related Decisions on national treatment, international
investment incentives and disincentives, and Guidelines
for Multinational Enterprises as adopted in 1976 and
reviewed in 1979. We also adhere to the OECD Code of
Liberalization of Capital Movements, adopted in 1961
and support its expansion.
encourage OECD governments to abide by the OECD
investment and capital liberalization instruments,
and to strengthen and extend these instruments
through broader extension of the principle of national
treatment and the right of establishment;
explore ways of extending the principles embodied in
the OECD instruments to non-OECD countries. To
increase the effectiveness of these instruments on a
global basis, the developing countries, and in
particular, the newly industrialized countries need
to be brought into any multilateral understanding on
investment;
support efforts to increase awareness of the extent
and adverse effects that government intervention,
e.g., through performance requirements, can have on
the U.S. and world economies. This is essential in
order to build the global political consensus necessary
to reduce the predatory use of such measures and
especially to limit the introduction of new measures
and the expansion of existing measures. The United
States will encourage and actively participate in
continued work in multilateral institutions to
address these questions.
encourage adherence by all countries to the Paris
Convention for the Protection of Industrial Property,
and enactment of effective industrial property laws,
guarantying recognition of patent, copyright, and
other industrial property rights. These are essential
for the flow of foreign direct investment into both
developed and developing countries. The lack of
adequate property rights is major disincentive to
investment in manufacturing facilities and research
and development and to the transfer of technologies.
The Paris Convention for Industrial Property Protection
is currently undergoing revision under the auspices
of the World Intellectural Property Organization.
The United States will support continued efforts
aimed at improving protection of industrial property
rights; fight to maintain current protection levels
where they are adequate and to upgrade protection
where it is inadequate; and work to ensure that such ..
principles are upheld in negotiations of codes relating
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to transfer of technology and transnational corporations which
are now underway in the U.N.
continue to work in the OECD for a "data pledge"
which would assure that no new barriers to data flows
will be imposed by developed countries; and encourage
all countries to join in adopting more open and
liberal policies on transborder data flows;
encourage adherence to the Code of Capital Movements
and support its expansion;
support the Multilateral Development Banks in their
efforts to foster more rapid economic growth in the
developing countries. The United States,will continue
to encourage the Banks to explore ways to develop
new programs to strengthen the private sector role
in financial flows to the developing world;
support the investor access to third party arbitration
to settle investment disputes, such as the facilities
of the World Bank's International Centre for the
Settlement of Investment Disputes. The United States
believes that governments should effectively support
investor access by adherence to the Convention of the
Settlement of Investment Disputes between States and
Nationals of Other States or the Inter-American Conven-
tion on International Commercial Arbitration, and by
evidencing their commitment to be bound by third
country arbitral awards by adhering to the Convention
of the Recognition and Enforcement of Foreign
Arbitral Awards.
V. In its bilateral relations, the United States:
in cases of expropriation or nationalization of
American investment abroad, will provide full support
for American investors to ensure that standards of
international law are honored by host governments;
will provide appropriate facilitative services to
assist American investors overseas and, in particular,
will assist them in obtaining information on the host
country investment climate, economic objectives, and
investment opportunities.
will work to ensure that the relevant provisions of
our Friendship, Commerce and Navigation treaties are
fully observed;
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As a means to facilitate and protect American investment,
will seek to conclude bilateral investment treaties
and agreements with interested countries. The
treaties will contain appropriate provisions on,
inter alia, treatment of existing and new investment
(including national treatment and most-favored-nation
treatment); transfers; dispute settlement; use of
performance requirements; and compensation in the
event of expropriation;
will explore, through our bilateral economic assistance
programs with developing countries, appropriate ways
to increase non-official flows, and will seek to
ensure that these programs effectively support
private direct investment;
-- reserves the right to take unilateral action against
the use of performance requirements and similar
policies, consistent with our international obligations.
The United States is now exercising and will continue
to exercise its rights under existing international
arrangements, including the GATT and OECD.
The United States believes that a combination of multi-
lateral and bilateral efforts will contribute to the achievement
of a more open global climate for investment and thus enhance
the prospects for economic growth in the United States and
globally.
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